Assuming consumption and leisure are both normal goods, hours worked will fall when the wage increases if
A. if the income and substitution effect move in the opposite direction (i.e., if they are of the opposite sign).
B. the income effect dominates the substitution effect.
C. if the income and substitution effect move in the same direction (i.e., if they are of the same sign).
D. the wage increase is accompanied by an increase in prices.
E. the substitution effect dominates the income effect.
Answer: B
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
In Figure 4-9 above, suppose LMA shifts to LMB. The distance from points A to L tells us
A) the change in income given zero interest responsiveness of Ap. B) the change in income resulting from the interest rate falling to its value at point B?. C) how much the money supply increased in producing the LM shift. D) the change in income that by itself raises the demand for money by as much as the money supply rose.
If the government decreases the income tax rate, they assume it will affect which component of GDP?
A. NX B. C C. G D. A change to the income tax rate will not affect any of these components.
Refer to the data provided in Table 9.4 below to answer the question(s) that follow. Table 9.4qTFCTVCTCMCAVCATC0$100 $0$100 ---- -- 11004014040 40 140 21006016020 30 80 31009019030 30 63.334100124 224 343156 5100180 280 56 36 56 6100 264 364 84 44 60.677100 372 472 108 53.14 67.42Refer to Table 9.4. The market price is $84 and this firm is producing four units of output. Which of the following would you recommend to this firm?
A. Increase output to seven units so that price is less than marginal cost. B. Continue producing four units of output, because the firm is able to make an economic profit. C. Increase output to six units, so that marginal cost equals marginal revenue. D. Reduce price to $34, so that marginal cost will equal marginal revenue at 4 units of output.